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Trust Decanting: Income and Transfer Tax Ramifications and Reporting

Continuation vs. New Trust, Gain Recognition Scenarios, Elections, and Filing Requirements

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, March 13, 2024

Recorded event now available

or call 1-800-926-7926

This course will provide tax advisers and compliance professionals with a comprehensive and practical guide to the reporting mechanics of trust decanting transactions. The panel will discuss decanting results in a non-reporting event and offer useful tools for determining when decanting causes either gain recognition or a transfer tax reporting and payment obligation.

Description

Trust decanting--the distribution of trust property from one trust to another--is a popular and frequently utilized vehicle for keeping current and tax-efficient estate plans. Despite the growing prevalence of decanting as a strategy, the IRS has not provided authoritative guidance on proper tax reporting treatment of decanting transactions. Indications are that a definitive statement may not be forthcoming any time soon.

In addition to notification requirements, tax advisers and compliance professionals must deal with several critical issues in reporting decanting transactions. Determining whether the second trust should be treated as an entirely new trust or simply as a continuation of the first trust has significant reporting consequences.

Another critical issue is the treatment when the decanting may generate gain recognition, such as in circumstances of distributions of negative-basis assets or creating new powers of appointment in the second beneficiary trust. Advisers must be sure to address the new vs. continuation question in reporting decanting transactions.

Listen as our experienced panel provides a thorough and practical guide to the tax reporting challenges and opportunities of decanted trusts.

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Outline

  1. IRS guidance on decanting transactions
  2. Notice requirements
  3. Continuation of existing trust vs. the creation of a new trust
  4. Gain recognition scenarios
  5. Changing of situs
  6. Filing requirements

Benefits

The panel will review these and other essential questions:

  • Under what circumstances is it preferable to treat the recipient trust as an entirely new trust rather than a continuation of the existing trust?
  • What is the impact of a decanting on tax attributes?
  • What decanting circumstances require gain recognition to either the distributing trust or the beneficiary/recipient trust?
  • What elections are available regarding gain recognition of decanted assets?

Faculty

Edmondson, S. Gray
S. Gray Edmondson
Partner
Edmondson Sage Allen

Mr. Edmondson practices in partnership, corporate, and individual tax planning; business transactions including mergers...  |  Read More

Morrow, Edwin
Edwin P. Morrow, III, J.D., LL.M. (Tax), MBA, CFP, CM&AA
Co-Chair, Estate Planning Group
Kelleher + Holland

Mr. Morrow is currently the Co-Chair of the Estate Planning Group of Kelleher + Holland, LLC, based in North...  |  Read More

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